The secreted factor Sonic Hedgehog (Shh) is critical for many developmental processes, including ventral development of the CNS and patterning of the limbs. Furthermore, mutations in the human SHH gene cause holoproencephaly, and inappropriate activation of Shh causes a number of tumors. Since the three mammalian Gli transcription factors, likely transduce all Shh signaling, it is critical to determine the normal function of each Gli protein. In Drosophila, the Gli homolog, Ci, acts as a repressor in the absence of Hh signaling and an activator in the presence of Hh. The situation is more complex in mammals, because there are three Hh and Gli genes and our studies of mouse Gli mutants have shown that each Gli protein has both unique and overlapping functions. A number of questions remain to be addressed about how Shh regulates Gli protein function. First, does Shh regulate Gli1 and Gli2 protein processing, in addition to Gli3? To date, no sensitive antisera have been raised against the Gli proteins that could be used to analyze Gli protein processing in vivo. A second question is how does Shh modify Gli protein activity in different tissues? Is Gli3 both a critical activator and repressor in the limb? Another question is whether Shh is required both locally and at a distance in all tissues. Recent work has shown that Shh can indeed diffuse but a study suggests that Shh is only required locally in some tissues, and the cerebellum could be a tissue in which Shh-signaling is only required at a distance. Finally, in order to fully understand how Shh patterns a tissue over time, it is necessary to know what cells receive Shh signaling at any given time and whether a constant population of cells are exposed to one concentration of Shh, or whether cell movement alters the concentration over time. We propose the following experiments to address thes questions: 1. To analyze Gli2 knock-in mice and Gli protein processing and subcellular localization. 2. To address whether Shh acts both to inhibit Gli3 and induce Gli2 in the cerebellum and limbs. 3. To address the extent to which only local signaling by Shh can pattern the CNS, limbs and skin. 4. To determine whether some cells receiving Shh signaling move away from the source of Shh and thus receive a shorter exposure to Shh than other cells using a Cre/loxP fate mapping approach with Gli1- CreEr mice.